Are you procrastinating writing or updating a business plan? Is it because you know it has to be 30 pages with half of them financials? This is one of several common business plan myths.
Let’s set the record the straight by dispelling three common myths about business plans.
Myth 1: Every business plan has the same format and is 30 pages long.
The 30-page business plan is the template found on many websites—the classic one-size-fits all approach. But this is inaccurate.
The stereotyped 30-page plan is often associated with applying for a six-figure traditional bank loan. However, these types of loans occur in less than 2 percent of the 565,000 start-ups launched each month. So your needs are likely different.
A one-person service business, which does not need third party funding, may only need a ten-page business plan that focuses on the messages and marketing.
Also, there are effective two-page, graphic-centered business plans used for established businesses that want to focus on a particular area, like marketing, and just need to make sure goals and actions plans are aligned.
To determine what business plan style is right for you, you need to know the purpose of your business plan. Is it to make sure you have all the bases covered, assess if your business idea is financially attractive before you commit your time and personal resources, apply for funding or some combination of these?
Also, you need to know your audience and what decisions you want them to make, so you know what information to provide. Is the plan just for yourself, your team, a banker to grant a loan, a customer to secure a contract, a vendor to obtain credit on purchases, etc?
Myth 2: Once written, a business plan does not need to be updated.
On the contrary, your business plan is probably out of date the day after it is written. This is due to the changing nature of your business, competitor actions and reactions to your entering the market, changing market conditions, use of estimates, your accomplishments and your decisions to take actions.
You should review your business plan at least once a year. Often, you and your team’s attention are focused on solving the daily business challenges, so once a year, take a pause and look ahead. This becomes the information for your business plan update. You can connect this review with an annual budget process.
Myth 3: A 30-page business plan with lots of financial information will get the bank loan needed to start or grow your business.
A business plan is just one of several criteria for getting a banker to review your loan application. Other criteria, and probably with as much weight, are your personal credit score, your ability to collateralize the loan, your ability to provide about 25 percent of the needed capital in cash and your experience in the business area.
In addition, if your two-page executive summary is not well done, your banker might not read any further.
- A business plan needs to be tailored to your specific situation: what is the purpose and who is the audience?
- A business plan should be updated at least once a year, taking into account all of your market and competitor changes and challenges/opportunities.
- A business plan is a necessary step but not a guarantee for obtaining funds.